Sata releases Magande’s letter to Dora

Sata releases Magande’s letter to Dora
Written by Amos Malupenga
Tuesday, March 17, 2009 2:18:14 PM

Patriotic Front president Michael Sata yesterday released a letter by former finance minister Ng'andu Magande which President Rupiah Banda said contained information on how the former finance minister proposed to forgive Zambian Airways’ debt to the government.

In an interview, Sata said he would not be pushed around by information minister Ronnie Shikapwasha, who is also chief government spokesperson, because the truth has to be known.

“I gave Rupiah a 48-hour ultimatum and I am not going to be pushed around by Shikapwasha. He is saying this is an MMD matter and I should leave them to deal with it because Magande is not a PF member. People should be allowed to know the truth,” Sata said.

“Magande is not only an MMD member; he is a national leader. So as leaders, there is no need to tell lies, falsehood about each other. We want the truth to be known in this matter. If what Rupiah said about Magande is true, let him defend that. What we want to know is the truth in this matter.”

Below is Magande's letter he wrote to communications and transport minister Dora Siliya on June 26, 2008 concerning Zambian Airways indebtedness to government.

“Dear Minister,

RE: REQUEST FOR A DEFERMENT OF VARIOUS CHARGES BY ZAMBIAN AIRWAYS

Reference is made to our conversation and the various documents you sent to me with respect to the above mentioned subject matter.

As a Ministry, we have taken time to go through the various documents and also had a meeting with the Chief Executive Officer of Zambian Airways. First and foremost, I wish to state that it is a fact that the global economy is facing a crisis spurred by incessant price increases of fuel.

Compared to last year at the same time, prices of oil in the international markets have more than doubled now. This development is going to impact negatively on the world economy. Inflation may rise due to the fact that fuel is one of the major production inputs for industries in the various sectors of the economy for many countries.

Unless countries come up with mitigating measures to address (even partially) the situation, the impact on the economy will become real or apparent and many industries may face greater difficulties. If nothing is done, it is possible that some companies or industries, especially those sensitive ones, could collapse or fold up and this in turn will affect growth and employment levels leading to social concerns.

It is against this background that Zambian Airways has approached the National Airport Corporation Limited (NACL) and the Government for assistance during this trying moment. As you may well know, the aviation industry is one such sensitive industry and therefore prone to the current oil price shock. While any company may be able to do some internal re-organisation to reduce cost and in order to survive, any increase in the air fares in an attempt to recover part of the cost may lead to loss of business and eventual collapse of an airline.

In such a global crisis, efforts by companies alone cannot be adequate to address and redress the situation. In the circumstances, any mitigation efforts at company level must be supplemented by the Government ones in an attempt to redress this international crisis in the best interest of the country. I have just announced a reduction in excise duty on petroleum products, resulting in loss of revenue to assist the economy.

It is evident that Zambian Airways has become a major player in the Zambian aviation industry and its contribution to the economy has been tremendous as evidenced by its growth in a short period. The current fuel or oil crisis poses the biggest challenge not only to the economy but also to the growth of the company and the aviation industry. By the company asking the National Airport Corporation for deferment of some charges, the company is indirectly asking for assistance from the Government so that it can go through this turbulent period and be able to survive.

If the condition in the industry was normal, Zambian Airways could have easily borrowed and could be able to address its cash flow problem. However, investors or lenders usually wait and see for this period to be over before they can think of putting more money in the company. Hence the company has difficulties in finding this extra finance and its survival is very much threatened.

Accepting the deferment proposal will obviously have financial implications on the operations of the NACL as it would translate into loss of projected income. Similarly, NACL could lose the same projected income if Zambian Airways goes under. There will be considerable repercussions on the economy and particularly in the aviation industry and the message to outsider would-be investors would also be negative. In view of the above, it will be in the best interest of the NACL, the aviation industry and the Zambian economy in general to keep Zambian Airways afloat.

The question is, how will NACL fill up the gap as a result of the deferment of the various charges? From the Government position, it is difficult to directly put money in Zambian Airways because this requires a policy change. On the other hand, it is easier to assist or give the money to NACL than Zambian Airways as a way of cushioning the impact of loss of income by NAC due to deferment of the fees from ZA.

Minister, on page 7 of the document entitled "Report on Zambian Airways" in paragraph 4.1.4, it is mentioned that NACL has a programme of upgrading and modernising infrastructure at a significant cost and has to raise finances by borrowing. This is an area which the Government can consider and assist NACL by providing resources for such infrastructure projects.

In the past two years, the Government has been able to assist NACL in similar way by providing additional resources of K16.43 billion to finance its infrastructure programme at the Livingstone International Airport (see attachments). It is worth noting that NACL is 100 percent owned by the Government and if the company assists Zambian Airways, it is actually GRZ providing assistance to a private sector company.

On the proposed deferment period of five (5) years, this seems to be too long. An alternative way is to initially consider a shorter period of say three (3) or two (2) years, which can be subject to review depending on the situation tenable on the ground. If the fuel crisis situation improves and Zambian Airways' cash flow position becomes positive, the whole scenario can then be reviewed and may be a partial deferment could be considered for the later period.

By preserving Zambian Airways, the Government will actually be reinforcing the Zambian economic empowerment policy. In fact the Government has, on a number of occasions, repeatedly said that the Zambian economy will be private sector led or driven and it will be disastrous to see private sector companies fold without rendering any assistance especially during crisis time. Zambian Airways is not asking for a grant but a deferment and NACL will eventually get the money back. Ultimately, Zambian Airways will be assisted and will eventually grow, employment will be preserved, its contribution to the Gross Domestic Product (GDP) will be sustained and investors' confidence will be maintained.

Given the above, my Ministry is not keen to see the collapse of ZA, given that the company faces a crisis situation. Your Ministry must do what it can to ensure that Zambian Airways does not collapse. We have provided a possible solution to the situation as indicated above and you are free to explore that option. With the suggested way, the negative financial impact that will be created by the deferment will be mitigated and NACL will be able to operate smoothly and be able to expand its resource base as a result of the growth of Zambian Airways operations. This will be a win - win situation with least or minimal damage to the economy.

Yours in the National Service,

Ng’andu P. Magande, MP

MINISTER OF FINANCE AND NATIONAL PLANNING.”



Sata on Saturday gave President Banda a 48-hour ultimatum to release the letter, failure to which he promised to release the copy in his possession. He said reading through the letter, he did not see any corruption on Magande's part. Sata said in case President Banda had a letter showing that Magande wanted to corruptly forgive Zambian Airways its debt, he should release it to the public so that the truth could be known.

President Banda recently told MMD cadres that marched to State House as a show of solidarity that he fired Magande because he wanted to corruptly forgive Zambian Airways’ indebtedness to the government. He charged that he fired Magande because he had documents to show that the former finance minister had intentions to let The Post, one of the sharesholders in Zambian Airways, get away with the money.

"They [The Post] started attacking me even before I became presidential candidate for the MMD. And when I became candidate for the MMD, they continued attacking me, up to now. I decided to fire Magande, who was their preferred candidate and you rejected him because I have documents that he wanted them [The Post] to go scot-free with the money they owe the Zambian people, that's why I fired Magande," President Banda said.

He urged The Post to choose between being a newspaper and becoming a political party. President Banda advised MMD members to be vigilant and wait for instructions.

"We don't run a jungle government and I have been quiet for too long but this is the time to be vigilant and face them [The Post] head-on," said President Banda. "As long as I continue to be the President of this country, I will ensure that The Post pays back the debt they owe the Zambian people.”